72A. Provisions relating
to carry forward and set off of accumulated loss and unabsorbed
depreciation allowance in amalgamation or demerger, etc.-
(1) Where there has been an amalgamation of—
(a) a company owning an industrial undertaking or a ship
or a hotel with another company; or
(b) a banking company referred to in clause (c) of section
5 of the Banking Regulation Act, 1949 (10 of 1949) with a
specified bank; or
(c) one or more public sector company or companies engaged
in the business of operation of aircraft with one or more
public sector company or companies engaged in similar business,
then, notwithstanding anything contained in any other provision
of this Act, the accumulated loss and the unabsorbed depreciation
of the amalgamating company shall be deemed to be the loss
or, as the case may be, allowance for unabsorbed depreciation
of the amalgamated company for the previous year in which
the amalgamation was effected, and other provisions of this
Act relating to set off and carry forward of loss and allowance
for depreciation shall apply accordingly.
(2) Notwithstanding anything contained in sub-section (1),
the accumulated loss shall not be set off or carried forward
and the unabsorbed depreciation shall not be allowed in the
assessment of the amalgamated company unless—
(a) the amalgamating company—
(i) has been engaged in the business, in which the accumulated
loss occurred or depreciation remains unabsorbed, for three
or more years;
(ii) has held continuously as on the date of the amalgamation
at least three-fourths of the book value of fixed assets held
by it two years prior to the date of amalgamation;
(b) the amalgamated company—
(i) holds continuously for a minimum period of five years
from the date of amalgamation at least three-fourths of the
book value of fixed assets of the amalgamating company acquired
in a scheme of amalgamation;
(ii) continues the business of the amalgamating company
for a minimum period of five years from the date of amalgamation;
(iii) fulfils such other conditions as may be prescribed
to ensure the revival of the business of the amalgamating
company or to ensure that the amalgamation is for genuine
business purpose.
(3) In a case where any of the conditions laid down in sub-section
(2) are not complied with, the set off of loss or allowance
of depreciation made in any previous year in the hands of
the amalgamated company shall be deemed to be the income of
the amalgamated company chargeable to tax for the year in
which such conditions are not complied with.
(4) Notwithstanding anything contained in any other provisions
of this Act, in the case of a demerger, the accumulated loss
and the allowance for unabsorbed depreciation of the demerged
company shall—
(a) where such loss or unabsorbed depreciation is directly
relatable to the undertakings transferred to the resulting
company, be allowed to be carried forward and set off in the
hands of the resulting company;
(b) where such loss or unabsorbed depreciation is not directly
relatable to the undertakings transferred to the resulting
company, be apportioned between the demerged company and the
resulting company in the same proportion in which the assets
of the undertakings have been retained by the demerged company
and transferred to the resulting company, and be allowed to
be carried forward and set off in the hands of the demerged
company or the resulting company, as the case may be.
(5) The Central Government may, for the purposes of this
Act, by notification in the Official Gazette, specify such
conditions as it considers necessary to ensure that the demerger
is for genuine business purposes.
(6) Where there has been reorganisation of business, whereby,
a firm is succeeded by a company fulfilling the conditions
laid down in clause (xiii) of section 47 or a proprietary
concern is succeeded by a company fulfilling the conditions
laid down in clause (xiv) of section 47, then, notwithstanding
anything contained in any other provision of this Act, the
accumulated loss and the unabsorbed depreciation of the predecessor
firm or the proprietary concern, as the case may be, shall
be deemed to be the loss or allowance for depreciation of
the successor company for the purpose of previous year in
which business reorganisation was effected and other provisions
of this Act relating to set off and carry forward of loss
and allowance for depreciation shall apply accordingly :
Provided that if any of the conditions laid down in the proviso
to clause (xiii) or the proviso to clause (xiv) to section
47 are not complied with, the set off of loss or allowance
of depreciation made in any previous year in the hands of
the successor company, shall be deemed to be the income of
the company chargeable to tax in the year in which such conditions
are not complied with.
(6A) Where there has been reorganisation of business whereby
a private company or unlisted public company is succeeded
by a limited liability partnership fulfilling the conditions
laid down in the proviso to clause (xiiib) of section 47,
then, notwithstanding anything contained in any other provision
of this Act, the accumulated loss and the unabsorbed depreciation
of the predecessor company, shall be deemed to be the loss
or allowance for depreciation of the successor limited liability
partnership for the purpose of the previous year in which
business reorganisation was effected and other provisions
of this Act relating to set off and carry forward of loss
and allowance for depreciation shall apply accordingly :
Provided that if any of the conditions laid down in the proviso
to clause (xiiib) of section 47 are not complied with, the
set off of loss or allowance of depreciation made in any previous
year in the hands of the successor limited liability partnership,
shall be deemed to be the income of the limited liability
partnership chargeable to tax in the year in which such conditions
are not complied with.
(7) For the purposes of this section,—
(a) “accumulated loss” means so much of the loss
of the predecessor firm or the proprietary concern or the
private company or unlisted public company before conversion
into limited liability partnership or the amalgamating company
or the demerged company, as the case may be, under the head
“Profits and gains of business or profession”
(not being a loss sustained in a speculation business) which
such predecessor firm or the proprietary concern or the company
or amalgamating company or demerged company, would have been
entitled to carry forward and set off under the provisions
of section 72 if the reorganisation of business or conversion
or amalgamation or demerger had not taken place;
(aa) “industrial undertaking” means any undertaking
which is engaged in—
(i) the manufacture or processing of goods; or
(ii) the manufacture of computer software; or
(iii) the business of generation or distribution of electricity
or any other form of power; or
(iiia) the business of providing telecommunication services,
whether basic or cellular, including radio paging, domestic
satellite service, network of trunking, broadband network
and internet services; or
(iv) mining; or
(v) the construction of ships, aircrafts or rail systems;
(b) “unabsorbed depreciation” means so much of
the allowance for depreciation of the predecessor firm or
the proprietary concern or the private company or unlisted
public company before conversion into limited liability partnership
or the amalgamating company or the demerged company, as the
case may be, which remains to be allowed and which would have
been allowed to the predecessor firm or the proprietary concern
or the company or amalgamating company or demerged company,
as the case may be, under the provisions of this Act, if the
reorganisation of business or conversion or amalgamation or
demerger had not taken place;
(c) “specified bank” means the State Bank of
India constituted under the State Bank of India Act, 1955
(23 of 1955) or a subsidiary bank as defined in the State
Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or
a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970 (5 of 1970) or under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of
1980).
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